Spirit Airlines, known for its budget fares, is currently navigating a challenging period marked by financial difficulties and an uncertain future. To counteract ongoing losses, the airline is implementing significant measures, including staff cuts and asset sales.
In a recent regulatory filing, Spirit announced plans to achieve approximately $80 million in cost savings set to begin early next year. Most of these savings will come from workforce reductions, though the airline has not revealed the exact number of affected employees or which positions will be eliminated. A company spokesperson did not provide additional information.
To strengthen its financial position, Spirit has also agreed to sell 23 of its Airbus A320ceo and A321ceo aircraft to GA Telesis, an aviation services firm, for $519 million. These planes, manufactured between 2014 and 2019, are scheduled for delivery from this month through February. GA Telesis has expressed excitement about the acquisition, noting it will significantly enhance its fleet.
Spirit anticipates that the proceeds from this sale, along with related debt repayment, will boost its liquidity by $225 million by the end of 2025. This strategy comes as the airline grapples with more than $2.5 billion in losses since early 2020, primarily due to escalating operational costs and intense competition from established airlines offering their own low-cost services.
Additionally, Spirit is facing a growing debt burden, with upcoming payments exceeding $1 billion. The airline expects a 20% reduction in capacity for the fourth quarter compared to last year, with further mid-teen reductions anticipated in 2025. These cuts reflect the recent aircraft sale and the grounding of other planes due to engine issues.
Amid these struggles, Spirit Airlines has been the focus of merger speculation, making it an appealing target for acquisition. Although no merger has been finalized, JetBlue previously attempted to acquire Spirit but withdrew its offer after a federal judge blocked the deal over antitrust concerns. Frontier Airlines has also shown interest in merging with Spirit but was outbid by JetBlue. Recent reports from The Wall Street Journal suggest that Frontier may be considering a renewed bid, sparking hopes for a potential merger.
Should a merger take place, it might involve Spirit restructuring its debt and liabilities through a bankruptcy process. The airline is reportedly in talks with bondholders regarding a potential bankruptcy filing. The future of Spirit Airlines remains uncertain, but the company’s actions indicate a desperate effort to survive in a fiercely competitive market.
